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ABOUT Education Loan

In the current economic situation, it is very difficult to fund education. Due to funding problems, many meritorious students have to quit their education. So, taking an education loan can help them in coming out of crisis and fulfill their educational dreams by giving them the much needed financial support for pursuing higher professional or technical education in India and abroad.

Education loan is a loan granted to Individuals for pursuing higher education in India or abroad where admission has been secured in some career oriented course like medicine, engineering, management etc. for graduate or post graduate level.

Education loan is disbursed in full or in installments depending upon the requirement of funds and are directly transferred by the Bank to the educational institution. The amount of loan granted, the interest expenditure and the processing fees differ from bank to bank.

FINMART helps you in choosing the suitable bank for you and arrange for timely finance.


Any individual who aims to go for higher education and needs funds are eligible for an education loan. The borrower should be an Indian National Individual whose loan has to be guaranteed by guardian or parent. Also the borrower should not have any outstanding education loan from some other bank. The prerequisite to obtain the loan is that the admission in recognized institution in India or abroad for which the loan is sought should be secured.

Required Documents

The documents needed vary bank to bank. Every bank has different norms for granting an education loan. But the basic set of document to be submitted can be briefed below:

  • Mark sheets of last qualifying examination
  • Proof of admission
  • Schedule of expenses for the specified course
  • Passport Size Photograph
  • Proof of address
  • Age proof
  • Prospectus of the course wherein entire fee structure is given
  • In case collaterally security, relevant bank papers
  • Photocopy of passport and visa in case of abroad studies
  • PAN Card of the student and the Parent/ Guardian
  • Borrower's Bank account statement for the last six months
  • Brief statement of assets and liabilities of the Co-borrower



No education loan will be provided for the donation to be given to institutions
The courses differ from bank to bank. Also different universities and courses both nationally and internationally differ from bank to bank. Approved courses can vary from graduate/post graduate degrees conducted by recognized universities to professional accounting, management, medical, engineering courses to diploma courses like aeronautics, shipping, nursing etc. to courses from foreign universities and job oriented specialized programmes. It is necessary that the courses financed should be for durations of more than a year, i.e., 12 months.

The expense list differs from bank to bank. They usually comprise of the following expenses.

  1. Fees payable to college/school/hostel
  2. Examination/Library/Laboratory fees
  3. Purchase of Books/Equipment/Instruments/Uniforms, Purchase of computers- essential for completion of the course  
  4. Travel Expenses/Passage money for studies abroad
  5. Insurance cover for the student
Any other expenses required to complete the course like study tours, project work etc.
The maximum loan amount varies from bank to bank, but, most importantly, it depends on the course for which the loan is sought and the institution chosen. The loan amount will vary drastically. Many banks have a margin criterion, which means that they would provide up to 75 per cent or 90 per cent of the total cost of the course, while the balance has to be paid by the applicant. The loan amount can also depend on the borrower's parents/guardians net monthly salary. However, the loan amount would depend on the discretion of the bank.
The repayment terms vary from bank to bank. Though usually it commences one year after completion of course or 6 months after securing a job, whichever is earlier.
This aspect depends on the amount of loan the student wants to avail. Every bank has its own slab wherein it has decided the type of security it needs from the student.
Yes. Repayment of an education loan is deductible under section 80E of the Income Tax Act. The yearly limit for deduction is only for the interest paid on loan and not on principal repayment. Only loans taken for higher education - full time studies in any graduate or post-graduate, professional, and pure and applied science courses - may claim deduction. The deduction will be available for a maximum of eight years starting from the year of repayment.
Most of the banks prefer not giving loans for part-time or correspondence courses, but ultimately it all depends on the bank's discretion and your relation with the bank. Since eligibility criteria are relaxed for these types of courses, and the chances of getting a good job after such courses are generally bleak, and also assuming that the applicant would be already working somewhere, banks prefer to stay away from financing these kinds of courses. But there are banks like the State Bank of India that provide students' loans for part-time and correspondence courses.
That depends on the bank. Nationalized banks do not have any pre-payment charges, but private and foreign banks usually charge a penalty, which usually ranges from 0.25 per cent to 2 per cent of the outstanding loan amount.
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